# USAProduction Volume Variance

#### JR.

EXPENSE:
Company ABC has forecasted \$190,000 in Fixed Overhead for the month of April 2018, but actual fixed overhead was \$160,000 netting a favorable spending variance of \$30,000.

ABSORPTION:
Company ABC has forecasted \$114,000 in FOH absorption with 7,000 earned hours (rate of \$16.29/hr), and actuals were \$150,000 in FOH absorption with 8,300 hours (rate of \$18.07 applied per hour).

How do I calculate the volume variance? Am I missing any components for the calculation? The scenario and numbers above are made up, this isn't in a text book, but I am trying to get a better understanding.

#### Yash

Hi, Volume Variance can be calculated by using the formula (ACTUAL VOLUME ABSORBED- BUDGETED VOLUME)* STANDARD PROFIT PER UNIT. But from the above question I am slightly confused, are you looking for Sales volume variance or FOH variance? Because I cannot see any sales figures. Txs.

#### JR.

I am looking for FOH variance. With your formula, I would come up with 8300-7000*16.29

I’m assuming the volume measure would be hours.

Do you agree?

#### Yash

I am looking for FOH variance. With your formula, I would come up with 8300-7000*16.29

I’m assuming the volume measure would be hours.

Do you agree?
Budgeted FOH 114000
Budgeted Hours 7000
Actual Hours 8300

FOH rate= 114000/7000= 16.29\$
Actual Fixed Overhead rate= 8300*16.29\$= 135,207\$

Fixed overhead Volume variance= 135,207\$ - 114000\$= 21,207 (Favourable)

Sorry did not notice Qty is Hrs previously

#### JR.

Hi Yash , thanks for validating. Your calculation was another one I used and that’s why I was a bit confused. I used a couple different sources and they seemed slightly different. It appears that expense does not factor into the calculation/analysis. We are only using absorption?

At high level, I would say that our volume mix was more favorable. How would you summarize a favorable or unfavorable volume variance ?

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